Malaysia: Distribution in a Digital Economy - BNM Assistant Governor

| 24 Oct 2018

It is undoubtedly the age of Digital Economy.

Encik Adnan Zaylani Mohamad Zahid, Assistant Governor, Bank Negara Malaysia (BNM), said in his keynote address at the General Insurance Agents Convention hosted by Persatuan Insurans Am Malaysia (PIAM) that the World Bank reported an accelerated growth of internet access of more than 170% in global accessibility in the past decade. In 2006, only 17% of the world’s population was estimated to have an Internet connection – but now that number is 46% in 2016.  During the same period, Malaysians with Internet access has increased from 52% to 79%, which is a very high number amongst many countries.

With the population growing savvier with technology, it is understandable to see a surge in e-commerce activities in the consumer markets.

Asia’s e-commerce transactions now makes up one quarter of global business in consumer markets. The largest proportion and number of these transactions originate from the People’s Republic of China; where the size of the retail e-commerce market has seen a fourfold increase from US$200 billion to US$800 billion from 2013 to 2017.

In Malaysia, the e-commerce transaction saw an increase of more than 69%, from US$1,856 million in 2016 to over US$3 billion in 2018. An estimate of businesses connected to the internet is at 62%, and more is expected to hop onto the bandwagon of a virtual marketplace.

Of particular importance in this shift is the role of intermediaries: In a market which is increasingly defined by customisation and speed of service, the role of matching customers to providers has become absolutely critical; the reliance on both parties being on the know-how and expertise of the go-between. And this certainly applies to your role as the main intermediators of insurance.

“There are many concerns over the potential upheaval of the status quo arising from the digitalisation of services. But I can share with you that we firmly believe that the agency force will continue to have a role to play in the general insurance sector even as it evolves into the Digital Economy.

“The reason for this is simple: insurance products can be complex and coupled with the sophisticated needs of clients such as individuals and SMEs, the human and personal touch of an agent can come in handy. It is these functions that will remain relevant in the Digital Economy; those that require intuition, discretion and sometimes, empathy; traits that are not easily programmable,” he said.

He advised general insurance agents to accept and embrace the shifting business dynamics towards digitalisation and suggested three strategies for general insurance agents to heed, not just to survive but to thrive in the Digital Economy:

1. Improve the customer experience

Given that the agency force are the insurers’ first contact point with customers, agents wield significant influence over how customers perceive and experience insurance.

It is thus critical for agents to provide the highest levels of service via continued and consistent displays of attentiveness and value adding, to build trust with their clients.

One of the ways is to promote and use e-payments to remove the many pain points associated with the manual handling of cash and cheques that are experienced by the consumer, agent and even the insurer.

2. Increase digital accessibility to prospective clients.

With the Internet and improved access amongst a growing number of the Malaysian population, online insurance solutions will not only become more viable, but also easier to adopt.

The agency force cannot afford to stagnate. Agents who move quickly to improve their digital outreach will have a first mover’s advantage and are likely to gain a growing group of digitally literate Malaysians.

3. Conduct robust suitability assessment for customers

Financial services offered must fit the needs of the customers. Agents should develop their individual capacity to analyse customer requirements to identify their needs and develop risk profiles to match them with suitable products or combinations of products. 

Appropriate profiling of a customer can be crucial in helping agents identify customised product recommendations efficiently.

 

Agents will continue to play key role

Agents have always been and will continue to be important agents, including agents of change in the insurance sector as they are uniquely positioned to read the pulse of customers, he said.

“The Bank remains optimistic that agents will continue to play a key role in Malaysia’s insurance industry, and will be crucial to take us to the next level. In all this, agents must not deviate from their raison d’etre, i.e. intermediating between the insurer and the customer. Ultimately, we all should recognise that it is the interests of the customers, which is at the heart of it. Jack Ma of Alibaba, aptly said it, ‘Customers should be number one.’”

 

For the full speech, read it here.

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